Electricity Market Reform moves ahead

According to the Department of Energy & Climate Change (DECC), reforms to the UK’s electricity market to drive low carbon investment and boost energy security took another step forward today with the announcement of key decisions to help shape the future energy landscape.

Energy and Climate Change Secretary Chris Huhne said:

“Today marks a milestone in delivering the reforms we need to move to a low carbon economy while keeping the lights on and costs for consumers down.

“The UK faces a huge energy investment challenge over the coming years, with a fifth of our generating capacity coming to
the end of its working life and electricity demand set to double.

“We want to give certainty to investors to develop the mix of clean energy sources that will power the UK in the years to come.”

Following publication of the Government’s Electricity Market Reform White Paper in July, the Technical Update published today sets out:

• The Government’s decision to legislate for a capacity mechanism in the form of a Capacity Market, designed to ensure consumers continue to enjoy reliable electricity supplies and avoid the higher prices that could result from tight capacity margins;

• The Government’s view that the System Operator, part of the National Grid, best meets the criteria for delivering the Feed-in Tariff with Contracts for Difference (FiT CfD) and the capacity mechanism;

• Detail on work to enable investment decisions for early projects;

• More detail on arrangements for Renewable Obligation Certificates from 2027 onwards; and

• The next steps for the Electricity Market Reform programme.

A further update on Emissions Performance Standards and FiT CfD will be published early next year. The Government intends to introduce electricity market reform legislation in the second session of this Parliament, which starts in May 2012, and for legislation to reach the statute book by the end of the next session (by spring 2013) so the first low-carbon projects can be supported from around 2014. The Government will put in place effective transitional arrangements to ensure there is no hiatus in investment while the new system is established.

The Government’s reforms of the electricity market aim to deliver the best deal for British homes and businesses: helping us to stop relying on imported oil and gas by creating a greener, cleaner and ultimately cheaper mix of electricity sources right here in the UK; nurturing a new generation of power sources including renewables, new nuclear, and carbon capture and storage, bringing new jobs and creating new expertise in the UK workforce.